Soybean prices performed relatively firmly in 2013, falling
a little over 6% in Chicago, held up by robust demand which meant that even
strong South American and US harvests could not rebuild world inventories too
But that could change in 2014, with ideas of another strong
South American harvest, and hefty US plantings too.
Will that rebuild inventories enough to allow buyers to
relax, and bank on much lower prices?
Leading brokers give their views.
Bank of America
"US biodiesel production from soyoil is growing rapidly,
albeit from a low base, and we expect this trend to continue.
"This source of consumption growth will likely lend support
to soybean prices near term, until news of new bumper soybean crops from
significantly expanded acreage in first Latam and then perhaps the US hit the
market next year.
"Ample production leaves 2013-14 ending stocks up 17% year
on year to 70m tonnes.
"Thus the global soybean market is relatively well supplied.
However, we cannot rule out the risk of price spikes due to US stocks still
being at multi-year lows.
"If Latin American plantings expand as strongly as we expect, or
northern hemisphere producers plant large amounts of soy in the spring, stocks
could go rise further at the end of the 2014-15 market year, creating downside
risk to prices."
"Brazil could find itself more or less level pegging with the
US in soybean production if it equals the previous year's record of 88m tonnes,
in the absence of adverse weather conditions over the next few weeks.
Forecasts for quarter
average, front Chicago futures contract
Commerzbank forecasts for soybean prices, 2014
Q1: $12.75 a bushel
Q2: $12.50 a bushel
Q3: $12.00 a bushel
Q4: $11.50 a bushel
"In Argentina too… more soybeans are expected to be
harvested in 2013-14 than ever before.
"In view of the relative price performance, the decline in
US soybean acreage mentioned in the US Department of Agriculture's long-term
forecast is unlikely to materialise in 2014-15. Indeed, a larger acreage can be
"Against the backdrop of expectations of a global surplus in
2013-14 and a positive outlook for the 2014 US harvest, a feeling of scarcity
is unlikely to become established on the soybean market in the foreseeable
future, even with the global stocks/consumption ratio remaining low."
"Last winter's record South American harvest and this
summer's still large US soybean harvest have set the threshold for [soybean
production] disappointment fairly high with a large weather shock necessary in
South America to tighten global soybean supplies next spring.
"[Under a conservative production scenario] we find that combined
March 1 2014 soybean stocks in the US, Brazil and Argentina, which account for
more than 80% of global soybean production and exports, would still reach
"While below the record high stock level of 177.6m tonnes,
this level of soybean inventory in the three major export origins remains
"Assuming normal weather conditions in coming months, we
expect the prospect of record large South American soybean production as well
as large US soybean/soymeal export commitments will be both bearish for soybean
prices relative to the current forward curve as well as maintain the CBOT
soybean and soymeal curves in backwardation to slow US exports."
We expect both Brazil and Argentina to produce record 2013-14
soybean crops, as a soybean/corn [price] ratio approaching 4:1 in some
locations encourages record soybean acreage.
"We model production of 86.94m tonnes in Brazil and 55.92m
tonnes in Argentina, up 6% and 13% year on year respectively, on planted acreage
increases of 5% and 6% year on year.
Morgan Stanley forecasts for season-average soybean prices
2013-14: $12.65 a bushel
2014-15: $9.80 a bushel
Prices for Chicago front futures contract
"Current prices are signaling US farmers to plant record
soybean acreage in 2014-15. Our initial projection of US 2014-15 plantings pegs
soybean acreage at a record-high 80.5m acres, up 5% year on year.
"Above-average global stocks should limit the need to add
South American acreage [in 2014-15] for the first time since 2006-07. In fact,
soybean acreage could stand to fall as much as 4% YoY, before combined Brazilian,
Argentine and US S/U fell year on year.
"At current currency exchange rates, US soybean prices could
fall as low as $9.80 a bushel before Brazilian farmers would be incentivised to
"Sales of US soybeans for export during the 2013-14
marketing year have been extremely large.
"On the surface, it appears that either exports will exceed
the USDA projection or that prices will have to increase to slow the pace of
"With year-ending stocks of US soybeans already forecast at
a near-pipeline supply of 150 million bushels, there is little room for exports
to exceed the current projection.
Exports can be measurably larger only if the 2013 US crop was larger
than the current forecast the domestic crush is smaller than forecast.
"A third alternative is that China will cancel some
purchases of US soybeans if the South American crop turns out to be large and
prices are lower and/or the current bird flu situation there worsens and
reduces the demand for soymeal.
"Developments over the next few weeks will be critical for
the direction of old-crop soybean prices.
A combination of export sales cancellations, a larger US crop estimate,
or a larger South American crop estimate would likely trigger a lower price
"Without such developments, current high prices would likely
persist a while longer in order to finish the rationing of old crop supplies."